Failure to Properly Use the Conditional Payment Administrative Appeal Process

In Mouradian v. United States Government, the United States District Court for the District of Massachusetts found that a Medicare beneficiary did not exhaust the conditional payment administrative appeal process. Because the administrative appeal process was not exhausted, the District Court could not make a decision regarding whether the Medicare Secondary Payer Act (MSP Act) and Debt Collection Improvement Act (DCIA) were unconstitutional.  2018 U.S. Dist. Lexis 163106.

Mouradian is a Medicare beneficiary. In 2015 he was in a car accident and Medicare made payments associated with the claim.  On 8/26/2016, Mouradian’s attorney for the liability claim sent an unsigned acknowledgment of settlement form to Medicare stating there was a settlement for $25,000.00. However, as discussed below, there was no settlement. On 9/1/2016, Medicare issued a final demand (initial determination) based upon settlement reporting in the amount of $25,000.00.

In lieu of appealing the initial determination and advising Medicare there was no settlement, the beneficiary first sought a hardship waiver from Medicare for all of the payments.  On 10/20/2016, Medicare agreed a partial waiver was appropriate and advised the beneficiary the initial determination was reduced $12,500.00.  On 12/12/2016, Mouradian first advised Medicare there was no settlement associated with the 2015 car accident. On 1/13/2017, Medicare requested additional information to support that the settlement proceeds were not dispersed.

Claimant did not formally appeal the 9/1/2016 initial determination. On 1/20/2017, instead of responding to Medicare’s 1/13/2017 letter, the beneficiary filed a pro se complaint in the United States District Court for the District of Massachusetts. In March and April of 2017, the Federal Government withheld some of Mouradian’s federal tax refund and began to garnish 15% of his Social Security retirement benefits.

After a scheduling conference for the case on 10/3/2017, the government refunded claimant’s money and stopped its collection process based upon the argument that there was no settlement at that time.  The government argued their actions should dismiss Mouradian’s complaint all together.

The Court agreed with the federal government that the reimbursement and halting of the collection process rendered part of the complaint moot. However, the Court disagreed the government actions also resolved the additional allegations and unconstitutionality of the MSP Act and DCIA. In analyzing the additional allegations, the court found that Mouradian did not present the arguments to CMS to determine whether their regulations and collection process was unconstitutional as applied to Mouradian. Because Mouradian did not follow the administrative appeal process outlined in 42 C.F.R. 405.900, et. seq., his arguments were being denied judicial review.

This case is an important reminder to all stakeholders in appealing conditional payments: (1) know, or obtain an expert who knows, the conditional payment administrative appeal process; and (2) If you want a federal district court judge to review your arguments to Medicare on conditional payments, you first have to follow the administrative appeal process outlined in 42 C.F.R. 405.900, et. seq.

Updates to follow as more case law develops.

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